System and method for underwriting a prepackaged business owners insurance policy

ABSTRACT

A method, computer program product and system are provided for underwriting an insurance product such as a business owners policy by establishing a prepackaged policy having predetermined coverages, predetermined limits, and a fixed price, screening a potential customer for eligibility, and issuing the policy. The process may omit application of underwriting models to provide risk profiles and a premium based on a customer&#39;s individual data. The screening process may include comparing information from a customer to characteristics of a category of customers eligible for the insurance product, and verifying the information provided by the customer using internal carrier and external sources.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.11/867,865, filed Oct. 5, 2007 and U.S. Patent Application Ser. No.60/828,593, filed Oct. 6, 2006, which are hereby incorporated herein intheir entireties by reference.

FIELD

The present invention relates to providing a prepackaged insuranceproduct, and more particularly relates to a providing a business ownerspolicy (BOP) with up-front pricing for micro businesses.

BACKGROUND

Insurance carriers typically underwrite BOPs based on a process as shownin FIG. 1 to cover a business owner's real estate (if the business owneris the real property owner), personal property contents (whether owningor renting the premises) and general liability. The limits and premiumstypically vary depending upon the carrier's underwriting model.Disadvantages of this approach include the customer having to walkthrough an application process to reach the price, which may beinefficient for the customer. The offering may be beyond the customer'sneeds, and the offering or the process difficult to understand.

A target market for property and casualty carriers is small (“micro”)businesses with 0-1 employees, who may or may not have prior insurance.Professional and personal services (for example hairdressers),consultants, real estate agents, and the like are examples of classes ofbusiness in which many micro businesses are found.

SUMMARY

Addressing the above problems in prior approaches, the system andprocess of the invention effectively invert and simplify the currentprocess of underwriting BOP by starting with a final price, omittingapplication of underwriting models to provide risk profiles and apremium based on a customer's individual data, screening foreligibility, and issuing the policy.

Generally described, one embodiment of the invention provides a systemfor insuring a party, comprising a database containing, for an insuranceproduct, predetermined coverages, predetermined limits, and a fixedpremium amount, and containing, for one or more categories of insureds,characteristics of members of the category; a user computing deviceconfigured to provide to a carrier automated system information relatingto an applicant and a request for a determination whether the applicantis a member of one or more of the categories of insureds in the databaseeligible for the insurance product; wherein the carrier automated systemis configured to receive the information and the request from the usercomputing device, to compare the information provided relating to theapplicant with category characteristics from the database fordetermining whether the applicant is a member of one or more of thecategories of insureds in the database eligible for the insuranceproduct, and to provide a response to the user computing device based onthe determination of eligibility, and if the applicant is eligible, theresponse providing an offer to bind the applicant to the insuranceproduct; and a network allowing the user computing device to access thecarrier automated system and allowing the carrier automated system toaccess the database.

The characteristics of members of a category in the database may, in oneembodiment, not include a risk level to be met by an applicantindividually. The coverages may include liability coverage.

The carrier automated system may be further configured in an embodimentof the invention to communicate over the network with one or more thirdparty information sources to seek verification of information providedrelating to the applicant. The carrier automated system may seek theverification of information at a time selected from prior to providingan offer to bind the applicant to insurance or subsequent to providingan offer to bind the applicant to insurance.

In an embodiment of the invention, the network comprises the Internet,and the carrier automated system comprises a carrier server operating awebsite.

In an embodiment of the invention, the user computing device may beassociated with an agent representing the applicant. Alternatively, theuser computing device may be associated with the applicant.

In an embodiment of the invention, the coverages comprise businessowners insurance, and the characteristics of a member category include(separately or in combination): business classification, sales volume,number of employees, payroll amount, credit score, or premises size.

According to another embodiment, the invention provides a method forinsuring a party, comprising providing a database containing, for aninsurance product, predetermined coverages, predetermined limits, and afixed premium amount, and containing, for one or more categories ofinsureds, characteristics of members of the category; sending from auser computing device to a carrier automated system over a networkinformation relating to an applicant and a request for a determinationwhether the applicant is a member of one or more of the categories ofinsureds in the database eligible for the insurance product; receivingat the carrier automated system the information and the request from theuser computing device; comparing at the carrier automated system theinformation provided relating to the applicant with categorycharacteristics from the database to determine whether the applicant isa member of one or more of the categories of insureds in the databaseeligible for the insurance product; and providing a response from thecarrier automated system to the user computing device based on thedetermination of eligibility, and if the applicant is eligible, theresponse including an offer to bind the applicant to the insuranceproduct.

According to another embodiment, the invention provides a storage devicehaving stored thereon instructions executable by a computer forproviding a fixed price for predetermined coverages and coverage limitsassociated with a category of insureds; screening information receivedrelating to a customer to determine whether the customer haspredetermined characteristics making the customer eligible for thepolicy, the predetermined characteristics not including a risk level;and issuing insurance for the predetermined coverages and coveragelimits at the fixed price if the customer is eligible.

According to another embodiment, the invention provides a system forinsuring a party, comprising: a database containing, for an insuranceproduct, predetermined coverages, predetermined limits, and a fixedpremium amount, and containing, for one or more categories of insureds,characteristics of members of the category; a carrier automated systemhaving access to the database and being configured to receiveinformation relating to an applicant and a request for a determinationwhether the applicant is a member of one or more of the categories ofinsureds in the database eligible for the insurance product, to comparethe information provided relating to the applicant with categorycharacteristics from the database for determining whether the applicantis a member of one or more of the categories of insureds in the databaseeligible for the insurance product, and if the applicant is eligible,providing an offer to bind the applicant to the insurance product.

According to another embodiment, the invention provides a system forproviding a business owner's insurance policy, comprising: a databasecontaining acceptable profile values for characteristics of microbusiness insurance customers, a fixed price, and predetermined coveragesand coverage limits for a business owner's insurance policy; and one ormore computer systems having access to the database and being configuredto execute computer software: to calculate acceptable profile values forcharacteristics of micro business insurance customers based on data forexisting customers in similar micro businesses, and set the fixed priceand predetermined coverages and coverage limits for the business owner'sinsurance policy based on the data, at least two of the characteristicsselected from the group consisting of micro business classification,payroll amount, credit score, premises size, sales volume, and number ofemployees; to store the acceptable profile values, fixed price andpredetermined coverages and coverage limits for the business owner'sinsurance policy in the database; to receive application information fora micro business party describing aspects of the micro business party'sbusiness related to the selected characteristics; to compare theapplication information received for the micro business party to theacceptable profile values; and in response to the applicationinformation for the micro business party having acceptable values forthe characteristics, to offer the micro business party the businessowner's insurance policy having the predetermined coverages and coveragelimits at the fixed price without further risk analysis of the microbusiness party.

According to another embodiment, the invention provides a method forproviding a business owner's insurance policy, comprising: calculatingacceptable profile values for characteristics of micro businessinsurance customers based on data for existing customers in similarmicro businesses, and setting a fixed price and predetermined coveragesand coverage limits for a business owner's insurance policy based on thedata, at least two of the characteristics selected from the groupconsisting of micro business classification, payroll amount, creditscore, premises size, sales volume, and number of employees; receivingapplication information for a micro business party describing aspects ofthe micro business party's business related to the selectedcharacteristics; comparing the application information received for themicro business party to the acceptable profile values; and in responseto the application information for the micro business party havingacceptable values for the characteristics, offering the micro businessparty the business owner's insurance policy having the predeterminedcoverages and coverage limits at the fixed price without further riskanalysis of the micro business party.

According to another embodiment, the invention provides a method forproviding a business owner's insurance policy, comprising: calculatingacceptable profile values for characteristics of micro businessinsurance customers based on data for existing customers in similarmicro businesses, and setting a fixed price and predetermined coveragesand coverage limits for a business owner's insurance policy based on thedata, at least two of the characteristics selected from the groupconsisting of micro business classification, payroll amount, creditscore, premises size, sales volume, and number of employees; receivingapplication information for a micro business party describing aspects ofthe micro business party's business related to the selectedcharacteristics; comparing the application information received for themicro business party to the acceptable profile values; in response tothe micro business party having acceptable values for thecharacteristics, verifying the truth of the application information; andin response to successful verification of the application information,offering the micro business party the business owner's insurance policyhaving the predetermined coverages and coverage limits at the fixedprice without further risk analysis of the micro business party.

From the customer's point of view, the invention eliminates unknownfactors (for example by providing an up front price rather than makingthe customer walk through an application process to reach the price),provides a well-defined product that is easy to understand, and providesa more efficient process.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a flow diagram of a prior art system and process forunderwriting business owner insurance policies.

FIG. 2 is a schematic diagram showing a system for providing variousaspects of a system for providing insurance according to an embodimentof the present invention.

FIG. 3 is a flow diagram of a system and process for prepackaging aninsurance product according to an embodiment of the present invention.

FIG. 4 is a flow diagram of a system and process for processing arequest for insurance according to an embodiment of the presentinvention.

DETAILED DESCRIPTION

The present invention now will be described more fully hereinafter withreference to the accompanying drawings, in which some, but not allembodiments of the inventions are shown. Indeed, these inventions may beembodied in many different forms and should not be construed as limitedto the embodiments set forth herein; rather, these embodiments areprovided so that this disclosure will satisfy applicable legalrequirements. Like numbers refer to like elements throughout.

The present invention departs from current underwriting practice byproviding a prepackaged insurance product based on class or category ofcustomer, with pre-set coverages and pre-set policy limits, based onqualifying the customer and issuing a policy. It applies readily to aBOP product based on class or category of business, such as microbusinesses as described above; but the concept can be expanded toinclude larger businesses or other customers.

Aspects of the present invention may be implemented in a system as shownin FIG. 2. As may be understood from this figure, the system 100 mayinclude one or more computing devices 110, 120, which may be used, forexample by a customer or an advisor, such as an independent insuranceagent, to access a carrier automated system. The carrier automatedsystem may include a carrier website 160 via a network 130 (e.g., aLocal Area Network (LAN), wide area network (WAN), the Internet, or thelike) for the purpose of requesting a determination of eligibility.Either or both computing device 110, 120 may include, for example, apersonal computer (PC), laptop, personal digital assistant (PDA),cellular telephone, or similar electronic device. According to oneexemplary embodiment, the carrier website 160 may be operated by carriersystem server 150 by way of the same or a different network 130. Inparticular, as discussed in more detail below, a component of thecarrier automated system, for example a carrier system server 150 in oneexemplary embodiment, may be configured to execute a computer softwareprogram to determine eligibility of a customer in the manner describedbelow.

The system may further include a database 140 accessible by a componentof the carrier automated system such as the insurance provider server150 for the purpose of obtaining information needed to determineeligibility of a customer to obtain a prepackaged BOP or other policy asdescribed below.

FIG. 3 shows a process for prepackaging an insurance product accordingto an embodiment of the present invention for use with a systemembodying the invention. At step 21, existing data for similar customersis provided. At step 22, statistical analysis is used to calculate modelprofiles using the existing data on similar customers to createcategories of businesses which do or do not meet qualifications for theprepackaged BOP product. At step 23, similar statistical analysis isutilized on the customer data to define the pre-set coverages and limitsthat will be offered for a competitive and profitable fixed price.Coinsurance may be specified. The policy is priced at a flat premiumusing the carrier's current underwriting models, for all businesses thatmeet the screening criteria. This pre-marketing analysis eliminates theneed for segmentation based on individual application data for theprepackaged BOP product. At step 24, the database 140 is populated withthe category information needed to determine eligibility of a customerto obtain the prepackaged insurance product.

FIG. 4 shows a process of binding an insurance product, such as a BOP,according to an embodiment of the invention. The prepackaged insuranceproduct may be distributed through an agency channel or directly tocustomers via online or other known methods. At steps 41 and 42, acarrier's marketing effort is directed to sell a prospective customer onthe carrier and the fixed price advantage of the insurance product. Atstep 43, the prospect may decline to proceed. At step 44, the customeris asked a minimum number of questions (for example, 10 questions),which vary depending on the class of business, to qualify the customerand determine risk acceptability. This process reduces the abandonmentrate, but the customer may abandon at this point. At step 45, thecarrier automated systems compare the data to the model profiles andreceive back in real time an indication whether the customer falls intoa category eligible for the insurance product.

Referring again to steps 42 through 45, when using an agency marketingchannel, the agent is able to tell the customer the fixed price upfront, obtains responses to the required questions, and accesses carrierautomated systems to submit the data.

Preferably, at this point in the process when eligibility is beingdetermined, at step 46, in real time, internal carrier or outside datasources are accessed to verify the data on which eligibility was based.At step 47 if the customer fails the eligibility screening orverification, coverage is declined. At step 48, if the customer passesthe eligibility screening and verification, the policy is issued.Alternatively, if verification is not done in real time during theprocess, it may be done subsequent to issuance, and the continuance ofthe policy may be made dependent on verification of the data provided.

In a direct customer version, such as the case of distribution online,the customer provides the answers to the required questions using thecustomer computing device 110, and receives either a refusal or issuanceof the insurance product.

Customer support is provided efficiently at minimized expense via selfservice support via an online support web site or a call center.

Examples of criteria that may be used for eligibility screening in step45 include, alone or in combination:

a. Business classification;

b. Sales volume;

c. Number of employees

d. Payroll amount;

e. Credit score;

f. Premises square footage.

The verification step 46 seeks to corroborate information received fromthe customer related to the eligibility criteria. For example, sourcessuch as Dun & Bradstreet may provide name verification and confirm theprovided class of business. In a more specific example, sources mightverify that the customer has a Federal Employer Identification Number(FEIN) that is associated with a business within the customer-providedclass of business. The customer may be linked to a tradename (DBA)confirmed to be located at the provided address in premises having theprovided square footage. Risk of fraud may be reduced by the use ofcontractual provisions known in the industry.

As an example of a prepackaged BOP as the insurance product of thepresent invention, a real estate agent might acquire a BOP for a $500premium with $25,000 in building and personal property coverage and $1million in general liability coverage. In one embodiment, a BOPaccording to the invention omits real property coverage when necessaryto enable the carrier to offer a fixed fee and maintain profitability.Business personal property coverage might be up to $50,000 (with adeductible such as $250), and business liability up to$500,000/1,000,000.

A BOP according to the invention is efficient for the agent to write andservice, and provides a clearly defined market, cross sellingopportunities, and opportunities to expand the agent's market. From thecarrier's point of view, the customer has fewer opportunities andincentives to say no to the policy, and abandonment rates are lower. Thecarrier may capture an untapped market and grow with a profitableproduct. The risk that the prepackaged insurance product will not fit aparticular member of the category may be mitigated by carefulspecification of limits, pre-renewal screening, a premium audit, and/orconverting the policyholder to a different policy.

The present invention may be applied to provide insurance coverage tocustomers in need of insurance other than business owners.

1. A system for providing a business owner's insurance policy,comprising: a database containing acceptable profile values forcharacteristics of micro business insurance customers, a fixed price,and predetermined coverages and coverage limits for a business owner'sinsurance policy; and one or more computer systems having access to thedatabase and being configured to execute computer software: to calculateacceptable profile values for characteristics of micro businessinsurance customers based on data for existing customers in similarmicro businesses, and set the fixed price and predetermined coveragesand coverage limits for the business owner's insurance policy based onthe data, at least two of the characteristics selected from the groupconsisting of micro business classification, payroll amount, creditscore, premises size, sales volume, and number of employees; to storethe acceptable profile values, fixed price and predetermined coveragesand coverage limits for the business owner's insurance policy in thedatabase; to receive application information for a micro business partydescribing aspects of the micro business party's business related to theselected characteristics; to compare the application informationreceived for the micro business party to the acceptable profile values;and in response to the application information for the micro businessparty having acceptable values for the characteristics, to offer themicro business party the business owner's insurance policy having thepredetermined coverages and coverage limits at the fixed price withoutfurther risk analysis of the micro business party.
 2. The system ofclaim 1, wherein the coverages include liability coverage.
 3. The systemof claim 1, wherein the one or more computer systems are furtherconfigured to execute computer software to communicate over a networkwith one or more third party information sources to seek verification ofthe application information for the micro business party.
 4. The systemof claim 3, wherein the one or more computer systems seek theverification of information at a time selected from prior to providingan offer to bind the micro business party to insurance or subsequent toproviding an offer to bind the micro business party to insurance.
 5. Thesystem of claim 4, wherein the network comprises the Internet, andwherein the one or more computer systems comprise a carrier serveroperating a website.
 6. The system of claim 1, wherein the applicationinformation for the micro business party is transmitted by a computingdevice associated with an agent representing the micro business party.7. The system of claim 1, wherein the application information for themicro business party is transmitted by a computing device associatedwith the micro business party.
 8. The system of claim 1, wherein the oneor more computer systems comprise a carrier server operating a websiteand communicate via the Internet.
 9. A method for providing a businessowner's insurance policy, comprising: calculating acceptable profilevalues for characteristics of micro business insurance customers basedon data for existing customers in similar micro businesses, and settinga fixed price and predetermined coverages and coverage limits for abusiness owner's insurance policy based on the data, at least two of thecharacteristics selected from the group consisting of micro businessclassification, payroll amount, credit score, premises size, salesvolume, and number of employees; receiving application information for amicro business party describing aspects of the micro business party'sbusiness related to the selected characteristics; comparing theapplication information received for the micro business party to theacceptable profile values; and in response to the applicationinformation for the micro business party having acceptable values forthe characteristics, offering the micro business party the businessowner's insurance policy having the predetermined coverages and coveragelimits at the fixed price without further risk analysis of the microbusiness party.
 10. The method of claim 9 further comprising, inresponse to the micro business party having acceptable values for thecharacteristics, verifying the truth of the application information. 11.The method of claim 9, wherein the coverages include liability coverage.12. The method of claim 9, wherein the characteristics are microbusiness classification, payroll amount, credit score, and premisessize.
 13. The method of claim 9, wherein the characteristics are microbusiness classification, payroll amount, credit score, premises size,sales volume, and number of employees.
 14. A method for providing abusiness owner's insurance policy, comprising: calculating acceptableprofile values for characteristics of micro business insurance customersbased on data for existing customers in similar micro businesses, andsetting a fixed price and predetermined coverages and coverage limitsfor a business owner's insurance policy based on the data, at least twoof the characteristics selected from the group consisting of microbusiness classification, payroll amount, credit score, premises size,sales volume, and number of employees; receiving application informationfor a micro business party describing aspects of the micro businessparty's business related to the selected characteristics; comparing theapplication information received for the micro business party to theacceptable profile values; in response to the micro business partyhaving acceptable values for the characteristics, verifying the truth ofthe application information; and in response to successful verificationof the application information, offering the micro business party thebusiness owner's insurance policy having the predetermined coverages andcoverage limits at the fixed price without further risk analysis of themicro business party.
 15. The method of claim 14, wherein the coveragesinclude liability coverage.
 16. The method of claim 14, wherein thecharacteristics are micro business classification, payroll amount,credit score, and premises size.
 17. The method of claim 14, wherein thecharacteristics are micro business classification, payroll amount,credit score, premises size, sales volume, and number of employees.